Trillions of currency are flying around the world, 24 hours a day, five days a week, making the currency markets (also known as forex or fx) the most active in the world. Fortunes can be won and lost quickly because brokers routinely let traders borrow big money to finance their speculations.
If you want to get in on this action, you’ll need a broker who trades currencies, and many of the big names in stock trading simply don’t offer this feature. Because the markets are so different, you should also judge a forex broker on different criteria than what you would use to judge a stock broker.
Below are some of the best forex brokers, including one that allows customers to trade cryptocurrencies.
Here are the best online brokers for forex trading in 2024:
- Interactive real estate agents
- Forex.com
- IG
- OANDA
Overview: Top online forex brokers in May 2024
Interactive real estate agents
Interactive Brokers is known for its low costs and powerful trading platforms that are preferred by active and professional traders. Forex traders will not be disappointed by the advanced trading tools available, as well as the real-time quotes from many of the world’s largest forex trading banks. You can even trade stocks on international exchanges and add a forex order to hedge the currency at the same time.
Interactive Brokers also started offering cryptocurrency trading in 2023. You can trade popular cryptocurrencies such as Bitcoin and Ethereum for attractive commissions.
- Prices: Commission: 0.08 – 0.20 basis points
- Maximum leverage: Up to 50:1
- Currency options: More than 100 pairs
Forex.com
As the name suggests, Forex.com specializes in currency trading (although it also trades metals and futures) and offers a plethora of attractive features. Customers can choose the pricing structure that suits them best: spread or commission.
Forex.com also gives traders access to over 80 currency pairs, and its success with customers has led to the broker declaring itself to be the #1 forex broker in the US, in terms of assets held with the broker. You get access to the broker’s own trading platform in web and mobile versions, or you can use MetaTrader platforms if you prefer.
- Prices: Spread and commission depending on account type
- Maximum leverage: Up to 50:1
- Currency options: More than 80 pairs
IG
IG is a more specialized broker focused on forex, and is open to American investors. It is a powerful broker that nevertheless offers many features, such as a demo account, that can help novice traders. The broker offers a web platform, a mobile app and access to the MetaTrader4 and ProRealTime platforms.
IG allows spreads as low as 0.8 pips (a pip is one ten-thousandth of a point) on its most widely traded currency pairs, and says its pricing for the euro-dollar pair is at least 20 percent lower than the top US brokers. The broker also offers an extensive range of charting options on its platforms.
- Prices: Scatter
- Maximum leverage: Up to 50:1
- Currency options: More than 80 pairs
OANDA
OANDA offers forex trading on 68 currency pairs, including all major and minor pairs, so you can be sure you have the important options. Customers can choose from the brokers’ own trading platforms in web and mobile versions or can turn to the popular MetaTrader 4 platform. Pricing is typically on a staggered basis, although customers with volume over $10 million per month can join the broker’s Elite Trader pricing structure and receive significant discounts.
OANDA also allows cryptocurrency trading through Paxos, allowing you to trade a handful of digital currencies, including the most popular Bitcoin and Ethereum. Bitcoin commissions are as low as 0.25 percent.
- Prices: Distribution and volume discounts
- Maximum leverage: Up to 50:1
- Currency options: 68 pairs
What you should pay attention to when choosing a forex broker
While you may be familiar with many of the brand name online stock brokers, only a few are in the business of forex trading. Instead, a plethora of more specialized niche brokers populate the space, and they may target large currency traders looking for every possible advantage.
But regardless of which type of broker you focus on, you’ll want to focus on at least a few features that are common to every forex broker:
- Prices: Forex brokers have two ways of pricing their services: by incorporating the price into the buy-sell spread or on a commission basis. Spreads are usually expressed in pips, or one ten-thousandth of a point.
- Lever: How much leverage will the broker let you take? Generally, traders look for a higher degree of leverage to magnify movements in the foreign exchange market. The level may differ depending on the liquidity of the currency.
- Currency pairs: A handful of major pairs dominate the trading, but how many other pairs (minor, exotic) does the broker offer? The most popular currencies are the US dollar, the euro, the Japanese yen, the British pound and the Swiss franc.
- Spreads: How wide are the broker’s spreads for trades? The greater the spread, the less attractive the trade. Of course, brokers who charge a spread markup will typically have larger spreads because that’s how they get paid.
Investors looking to purchase cryptocurrency may be able to do so through some of the traditional stock brokers such as Interactive Brokers or Robinhood, although the trading works differently from regular forex trading, as described above.
A downside for US traders is that many top forex brokers are based in Britain and simply won’t accept them as clients due to their citizenship. However, the above brokers are all fine for Americans.
Frequently Asked Questions About Forex Trading
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Forex trading involves exchanging one currency for another. There may be practical reasons for this, such as traveling abroad, or traders may try to speculate and profit from currency fluctuations. The foreign exchange markets are generally the largest and most liquid in the world.
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Forex traders face various risks, including interest rate risk, leverage risk, country risk and counterparty risk. Traders will need to be familiar with many different variables that can affect a country’s currency, including central bank developments, inflation, trade deficits and more.
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Regulation of forex brokers is important for maintaining business standards and protecting customers. The Commodity Futures Trading Commission (CFTC) says most scams involve unregistered people, products or companies. So if you’re into forex trading, you’ll want to use a registered broker, and it’s actually easy to determine if you’re working with a broker.
The CFTC registers and regulates forex brokers. A broker must meet certain financial standards, its staff must undergo background checks, and the company must adhere to certain conduct and disclosure requirements.
You can check whether a forex broker is properly registered by visiting the website of the National Futures Association (which is regulated by the CFTC) and using its search function. You can check a broker’s registration, its disciplinary or regulatory history, and financial information. Be skeptical of entities that are not properly registered. -
When you trade forex, you need a broker to execute your trades, but the broker may not always act in your best interest first. There are a few different types of models – a trading desk and an agency broker – and they have different incentives when executing trades.
An agency broker is someone who acts in the best interests of their clients and whose job is to find the best deal price. Thus, the agent broker does not maintain an inventory of the assets being traded, which could conflict the interests of the agent and the client, and instead acts merely as an intermediary. The customer pays the broker specifically for this service, which can save the customer a lot of money. So agents are usually reserved for wealthy clients who move huge amounts of money.
A trading desk, on the other hand, trades and owns securities at the same time. This structure means that the trading desk does not always work in the client’s best interests, but rather in their own interests.
A trading desk can therefore act as both principal and agent in a transaction, creating a number of strange conflicts:
- As a principal, the trading desk trades on its own account, meaning it can take over a trade from a client where it has a vested interest in the outcome. In other words, the trading desk could make a profit at the customer’s expense, for example by transferring stock to the customer just before the market falls, or buying it just before the market rises.
- As an agent, the trading desk can execute trades for a client and report the trading price.
Because of this structure, a client may never know where the trading desk’s interests lie in an individual trade – a problematic situation if you are the client.